Use the information below to answer the following question(s):Howard Co. uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate no effect on net income. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate no effect on cash flows.On December 31, Year 1, the Prepaid Insurance account decreased by $4,000 as a result of the recognition of insurance expense in an adjusting entry. 

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What will be an ideal response?


(D) (NA) (NA) (NA)
Insurance expense decreases net income, but does not affect cash flows. There was no cash payment to purchase insurance and thus there is no cash outflow reported in the operating activities section of the statement of cash flows.

Business

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